Better Roads Staff
Contractors are the original “when life gives you lemons, make lemonade” people. They’re entrepreneurs and they know how to spot opportunities.
In this spirit, contractors have harnessed the pressures of the recession to ramp up innovations in recycling. In the past few years, the asphalt industry – already America’s number one recycler – has sharply increased the use of both reclaimed asphalt pavement (RAP) and reclaimed asphalt shingles (RAS). In 2005, about 12.5 percent of the asphalt pavement material used was made up of RAP. According to a survey that NAPA performed on behalf of the Federal Highway Administration, that number increased to 17.6 percent in 2010. Use of RAS increased 57 percent from 2009 to 2010. The asphalt industry is also the country’s largest user of recycled fuel oil (RFO).
Altogether, the recycling efforts of the asphalt industry, including both the incorporation of RAP and RAS into pavements and the use of RFO in production facilities, saved America more than one billion gallons of oil in 2010.
NAPA continues to advocate at the national level in favor of a robust, multiyear highway program. The “multiyear” aspect is critical to both those who own pavements and those who build them. Many major infrastructure projects are constructed over a period of several years, and capital costs are considerable. If funding in future years is uncertain, agencies and private owners will not be able to commit to projects. If owners do not commit to projects, some workers may lose their jobs and contractors may be reluctant to purchase new equipment. In the absence of a multiyear federal-aid highway program, we at least know the level of federal funding for 2012: $41.6 billion, about the same as 2011.
This economy has provided plenty of lemons – and NAPA’s members are ready to make lemonade.
An Expert Opinion:
Toby Mack, president and CEO, Associated Equipment Distributors
Aside from some isolated bright spots, the overall picture remains weak for most U.S. dealer markets.
However, if you’re in geography with active energy exploration and production, and with the right products, business is good. Particularly in the Marcellus and Utica shale-gas plays in Pennsylvania, Ohio and (one hopes soon) New York, business is actually great or will soon be. It’s the same with other horizontal drilling/hydraulic fracturing areas in the South Central and West. If you’re in North Dakota or Montana and supplying the Bakken oil fields, you’re maxed out: You can’t find enough people and you can’t get enough product to meet demand. If you’re in strong agricultural areas and, again, have the right products, you’re likely benefitting from strong demand and high prices for corn and beans – largely driven by ethanol production. If you’re in underground products that support broadband expansion, that’s good too. And if your area of responsibility covers coal, copper or gold mining, the same is true. Also reasonably healthy is government-funded institutional building construction such as for education, healthcare or government facilities.
Despite the best efforts of the Obama administration and its regulators to throttle any activity that disturbs the dirt, water or air, or encourages consumption of fossil fuels, I believe the compelling economics of our new-found energy abundance will trump absurd attempts to run the country on windmills and solar panels.
For most of the traditional – and more universal – drivers of demand for construction machinery – residential housing, commercial construction, transportation and water infrastructure – the news for 2012 isn’t much better than it was in 2011. None of these markets appear ready to rebound in 2012.
Thus, for many dealers the challenge remains to keep product support operations – parts and service – at the forefront to support equipment owners keeping old fleet running until a better outlook supports the purchase of new. Rentals will also improve as the jobs that are out there require them, but with little follow-on work in the pipeline to support purchase.
We will see robust demand return in 2013, provided we get a federal government in Washington that understands how to encourage rather than stifle private-sector growth. AED is working hard on this and welcomes any support our industry can offer.
An Expert Opinion:
Ken Simonson, chief economist, Associated General Contractors of America
Construction should finally reverse its five-year slide in 2012. However, the overall increase will be modest and very unevenly distributed among project types.
Rental apartment construction may be the biggest winner. By late 2011, rents were rising and vacancy rates falling in nearly every metropolitan area. Permits and starts were up sharply. These indicators virtually guarantee a strong rate of spending on new rental construction in 2012. In contrast, the much larger single-family market appears to have bottomed out, but has yet to post any sure signs of improvement.
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